The Mail is proposing to change the licensing system for PAF, which could have costly consequences for its customers. The deadline for a consultation on these changes passed in September and the print industry is worried – really worried. PAF is a cornerstone of Royal Mail’s postal business and many companies, including its competitors, rely on it.
In order to access the PAF, customers pay a licence fee – big business, which could become even bigger after a consultation summary is published later this month laying out a timetable for the next steps. Last year, the Mail earned £27m in revenue from the PAF; its 37,000 users each pay one of a complex raft of fees depending on the volume of use and number of users.
These range from £75 for a single user, to £12,377 for organisations with up to 300 users and an eye-watering £90,000 for corporate groups.
Royal Mail insists its proposals are intended to simplify PAF, "incentivise" take-up, encourage greater use and enable it to better meet the needs of users. The Direct Marketing Association (DMA), however, is alarmed at a mooted new charging model: a fee of between 1p and 8p every time an address is checked against PAF. The potential cost increases are huge, warns executive director Chris Combemale.
For example, he reckons that a company that mails 2.5m letters a month could see its monthly costs rise from between £24,000 to £200,000. "We agree with Royal Mail that PAF licensing needs to be simplified to increase the number of users. But it can implement them without increasing costs for business customers," he says.
GI Solutions deputy managing director Patrick Headley, whose company’s licence costs £16,000, says the maths is simple and stark: a company charged 1p per record, pays £100,000 for 10m mailings. Royal Mail says it is listening to how pricing models would work and "would like to reassure customers our intention is to develop a pricing structure that meets current and future needs".
But Dave Broadway, managing director of CFH Total Document Management, is also worried and has also done the maths. His company uses PAF to sort mail, a big help to Royal Mail, while his Docmail system accesses it to tell customers if their addresses are correct or not. Why should he pay more, he asks, when all parties benefit from correct sorting and delivery.
"If the Royal Mail charges a penny or more per click for a letter that can go through the system several times, it soon adds up. Even if it increases costs by only 10%, that is a rise no company can bear; it’s simply too high a percentage to take.
"Yet everyone benefits from the service; me, the man in the street posting a letter to aunty Dot, and the postman who wants to do his job without hassle."
Public money
His objections, however, are more lofty than just bottom-line concerns: "No one else has this data and it is of value to most of the people in the UK. It has been created through public investment and we are now being told to pay for it again. Furthermore, that money will go into the pockets of a very small number of people once the Royal Mail is privatised, so I have strong moral objections."
Strength of feeling of this kind may save the day for PAF as we know it, hopes BSkyB head of print management Mark Cruise: "Everyone is rightly concerned about possible changes and for that reason I do not think the 1p to 8p click charge will go ahead. It would kill direct mail: the cost alone at the end of the year could be greater than the cost of paper and production."
Cruise agrees some form of simplification is needed to standardise a scale of fees. There may be scope for a one-off flat fee per user for the year, which is fairer than charging one business £10,000 and another one down the road £20,000, he feels. But radical rethinking is needed because "the proposed structure would exponentially outstrip the current fee".
The DMA says it is in "delicate" talks and is anxious not to stoke up any further a debate that is already raging fiercely. It will continue to work with all parties to ensure an agreement is reached that is equitable to all, says Combemale. GI Solutions’ Headley is blunter, warning of "pandemonium" unless Royal Mail "sees some sense".
OPINION
PAF must evolve to adapt to serve changing marketplace
Stephen Agar, managing director, consumer and network access, Royal Mail
Royal Mail is committed to simplifying licensing and pricing of the Postcode Address File (PAF). This is something we, the government, Ofcom and our customers want. That was the aim of the consultation.
It is important we continue to evolve PAF licensing to meet the needs of users – both existing and potential new ones. We want to encourage greater use of PAF. Since its introduction, the way in which the postcode is used has diversified and grown. At the same time, so has the way we have licensed it.
Before the introduction of the current PAF licence, Royal Mail consulted with the market and its representatives to develop a framework that offered users more choice on how to license the PAF. New features, such as transactional pricing and internal and external usage options, were introduced.
The use of PAF has increased significantly since these new measures were implemented. We have tried to adapt to the changing market demands, and want that to continue. The consultation we have undertaken is an important part of that process.
But there have been concerns raised about the pricing proposals in the consultation. It is not our intention to generate material additional revenues from our existing customer base. Our aim is to maintain current price ranges and operating models wherever possible. After all, we want to extend use of and access to PAF, not restrict it.
Royal Mail will carefully consider all responses to the consultation and continue to communicate and engage with the market. I am sure that we can create a licensing regime that simplifies licensing, retains current levels of flexibility and will work for existing customers and attract new ones.
We are committed to a licensing approach that will meet the aims of increasing the levels of PAF usage and will allow growth without disrupting the ways current customers use the data.
READER REACTION
How worried are you by the proposed changes to PAF prices?
Kathy Woodward, chief executive, BPIF
"The various mailing houses are feeding back the disastrous impact this would have for mailing volumes. The Royal Mail fully understands the sensitivity around their volumes and we had been led to believe they would be looking at initiatives to stimulate the market going forward rather than harm it. It is important that marketers continue to see mailings as a major platform and that funding is not redirected to other media that on the surface appear cheaper, but in reality are less cost-effective. Any uncertainty on pricing is unhelpful. I hope that all businesses potentially impacted responded to the consultation."
Rhys Morgan, managing director, DP Direct
"I can see both sides: Royal Mail is being privatised and this is a revenue stream that’s unique to the organisation. Charging 1p to 8p per record is not the same as per transaction. Maybe the figures would be a little on the high side, but it remains to be seen how expensive it will be. But there will be an extra cost, which we can’t bear so it will be passed on to the client. Net result: it will push the client away from print and into other cross-media areas. This will push print companies that are teetering on the brink, over the edge."
Judith Donovan, chairwoman, Royal Mail Strategic Mailing Partnership
"While some elements of the proposal are likely to be welcomed – shorter, more permissive licensing terms – it should be remembered the current structure offers the flexibility and choice that the market needs and wants. Royal Mail should guard against making change for the sake of it. We have made our feelings clear: while sensible changes to the way PAF is licensed and managed are welcome, there needs to be confidence within the market that its views have been listened to and that the current operating model and associated pricing will be allowed to continue."
